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Homeowners have numerous reasons to convert a basement into an apartment: A returning college grad might need a rent-free place to live while accumulating savings; they may need a place to house an au pair for their young children, have an aging parent or grandparent who doesn't want to live alone, or want income by renting otherwise unused space.

"If the home is near a college, there could be high demand for a renter who doesn't want to live in a dorm," says Neil Salvage, general manager of Lending Tree Home Pros, which connects contractors and homeowners.

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Kathryn and Steven Van Asselt found yet another reason after they purchased a house in Portland, OR, two years ago with a 700-square-foot basement. They knew the location would appeal to those moving into the area and not wanting to reside temporarily in a hotel.

With Steven's expertise as a general contractor and owner of Van Asselt Construction, they also knew they could make improvements affordably, and their prior experience as landlords gave them a leg-up on what renters seek and how the process works. They first checked city regulations to be sure they could have someone live fulltime within their premises and pay rent, install a working kitchen, meet criteria for minimum ceiling height (at least 6'8"), and have the right number of egresses for safe exit.

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To save space in their basement apartment Kathryn and Steven placed the washer and dryer in the bathroom.

To save space in their basement apartment Kathryn and Steven placed the washer and dryer in the bathroom.

Next, they had the space inspected to be certain it was dry—and would remain so. Then, they were ready to make changes—provide a private access to the street so their tenants wouldn't have to enter and exit their home, break through concrete walls to enlarge windows to add light to the bedroom and living walls, add insulation for warmth and sound dampening to cut noise to their upstairs level, install a full kitchen and bathroom, and paint walls.

Furnishing the apartment became the fun part of the process, but they kept costs down by purchasing mostly at IKEA. "We knew that people like IKEA because it's modern and cheerful," says Kathryn, a professor at Portland State University. She also knew to add in nice perks—good coffee maker, HD flat-screen TV, towels, real closet space, laundry equipment, and stack of maps and brochures about Portland. They estimate total costs at between $15,000 and $20,000, and have been able to find renters through Craigslist who pay $400 a week, with one-month minimum stay.

Basement Remodels: Before and After

Before

Retired decorator Ruth Shacter set out to have her 1960 basement updated as a guest retreat. Since her late husband, Jack, put so much effort into building the modern space, Ruth was excited to breathe new life into it with the same style they loved so much.

After

In order to make it bright and welcoming, Ruth painted the space dove gray, then added high-energy contrast with accents of red. A collection of Asian prints, purchased by the couple while living in Japan in the 1950s, hangs in her remodeled basement living room.

Office Desk On Display

Since Ruth's late husband was attached to his hardy 1950s oak desk, she was adamant about keeping it in the space after the remodel. To give it a modern update, she had it sanded, primed and then sprayed with high-gloss charcoal lacquer. In order to keep the area well-lit, a junction box was added and a custom drum pendant was hung with the bottom 38 inches above the desktop.

Gray, Red and Retro

The guest bedroom features a pair of Regency-style twin beds belonging to the couple. Set against a dove-gray backdrop, the beds topped with Chinese chinoiserie pillows truly pop.

Before

When Julie Bitton and Tom Price bought their three-story townhouse, the basement was one of the first rooms to overhaul. The walls were painted a putty tone, the millwork and trim were painted glossy black, and the floor was covered with beige wall-to-wall carpet that seemed dated and dull.

After

In its new state, Julie and Tom's basement is much lighter and more energetic. They integrated color through the paint and wallpaper choices, selecting a shade of dove gray called First Snowfall from Benjamin Moore for the walls. By using the back of the sofa as a room divider, they created another area for seating for four around a table.

Lounge-Worthy

TV Station

Julie and Tom decided to save more money by sticking with Julie's 42-inch flat-panel TV. Julie thought the walls behind the custom built-ins seemed bare, so she chose a geometric wallpaper in dark brown and silver to pick up on the dark tones of the floor.

Before

When Brian Patrick Flynn bought his 1955, three-story ranch, the basement’s bonus room was dark and cramped. The dated carpet and stippled effect ceiling created a disconnect from the home's overall mid-century modern vibe.

After

From the ceiling down to the floor, every detail of the room was changed to create Brian's dream design studio. To keep the rest of the home's silver and dark brown palette present in the space, the designer chose dark wood kitchen cabinetry outfitted as workspace storage.

Cozy Closet Niche

Before

In its existing state, the basement was covered in wall-to-wall carpet, had poor lighting and was used as a place for things that seemed to accumulate over time.

After

Josh Landers and Josh Williams embarked on a basement remodel to create a space where they could work from home several days a week while tending to their puppy, Bentley. Changes included using only dog-friendly, durable and easy-to-clean materials, from the vinyl plank flooring and vinyl crocodile wallcovering to steel furniture and custom draperies made from indoor/outdoor fabric.

Photo By: Photographer: Christina Wedge

Smart Storage

To keep the den clutter-free, Landers and Williams use a modern 1960s console to house all of Bentley's needs as well as their own office supplies. Atop the console sits a pair of modern lamps that light the corner, and on the wall is an old pet supply storefront sign that was picked up at an antique market.

Photo By: Photographer: Christina Wedge

A Porch for the Pooch

One of the biggest issues with the porch in its existing state was the unattractive air-conditioning unit. . To keep the air-conditioning unit hidden from view, the contractor created a hanging partition. The floor of the covered porch was updated with a roll of faux turf.

Photo By: Photographer: Christina Wedge

Before

When Michelle Workman first moved into her Lafayette, Calif., home, she was determined to overhaul its dated game room into a sophisticated, serene, Hollywood-inspired design studio.

After

Determined to save costs and stick with a short timeline of three weeks, Michelle decided to keep the built-ins that were previously used as game room storage. By placing her writing desk in front of the wall, she can look out into the backyard while working. "I didn't want to sit at my desk all day and stare at the wall. It was important to be able to look outside from my chair," the designer explains. "Floating the desk in front of the storage wall was the perfect solution."

Inspiration Corner

Michelle gave a corner of her design studio a defined purpose as an area for sourcing ideas and fabrics. When she comes across something inspiring in a magazine, she simply tears a page out, then tacks it up on the screen behind her.

Custom Pieces

To take full advantage of an 8-foot wall to the left of her design studio's entrance, Michelle designed a custom banquette where she can read design books. In keeping with her signature glamorous style, she chose a glossy, glazed linen for the upholstery with super shiny chrome nail head detail.

Before

When Alison Deyette first purchased her 1960 midcentury-modern house in Sherman Oaks, Calif., she found it difficult to imagine the ground-floor storage space could be transformed into a glamorous, storage-packed dressing room closet.

After

In two weeks the ground-floor storage room became a custom dressing room closet and stylist's studio, plus a space for overnight guests.

Work Station

Tucked snugly beside the entry door, Alison’s sewing station can be completely partitioned off during fittings by grape-toned satin draperies.

Here's what else the couple and others suggest:

For smaller apartments, focus on space-saving furnishings and appliances, such as wall-mounted toilets and Murphy beds, says Marianne Cusato, author of The Just Right Home and designer of the tiny post-Hurricane Katrina cottage.

Tie plumbing into the main home's existing stacks to save since this is typically the biggest basement expense, says architect Duo Dickinson.

Focus on comfort and warmth. Go with carpet tiles or area rugs atop cold stone or concrete; insulate walls, ceilings, floors, and pipes, and use materials that won’t decay if wet, says architect Joe Eisen.

Consider a separate mechanical system and sound-proof it if located next to the apartment.

If older relatives come to stay now or down the road, consider installing an elevator or at least having a space reserved for it. Though it can run $25,000, that's far less than an assisted care facility, says architect Aaron D. Murphy of ADM-Architecture and a Certified Aging in Place specialist for the National Association of Home Builders. Consider other universal design ideas: color contrasts when levels change, zero thresholds for showers, grab bars in tubs and by toilets, wider doorways, lower counters for wheelchairs to access easily, he says.

Think furnishings and surfaces that are easy to clean and maintain, so they'll wear well and look good after renting repeatedly.